The Big Boys: Are insurers stoking the fires of consumer discontent?

Talking Points Memo shows that it's all about market share and the bottom line

Insurance companies are easy for the media to demonize in the abstract. But when it comes to revealing how they operate—well, that’s harder. They’re a pretty secretive bunch these days, even as they’re constantly in the news amid the rollout of the new health exchanges.

Across the country insurance companies, have sent misleading letters to consumers, trying to lock them into the companies’ own, sometimes more expensive health insurance plans rather than let them shop for insurance and tax credits on the Obamacare marketplaces… In some cases, mentions of the marketplace in those letters are relegated to a mere footnote, which can be easily overlooked.

Indeed they can be—and important stuff, like the subsidies, can even be omitted entirely as companies seek to persuade (some of) their policyholders to stick with them awhile longer. This summer we found that Aetna had failed to disclose to a woman whose policy the company was cancelling that she might be eligible for subsidies. And in August, we detected hints that consumers were being pushed by brokers, too, to lock in plans that might turn out to be higher-priced or less comprehensive than what they could get by waiting to shop on the exchanges. (The details of the comparison depend, of course, on each customer’s needs and circumstances—something that has often gotten lost amid the media’s belated discovery of plan cancellations.)

The strength of Scott’s piece is the discussion of the marketing practices of two insurers: LifeWise, a subsidiary of Blue Cross/Blue Shield in Washington state, and Humana, a one-time regional carrier that became a national powerhouse after latching on to the Medicare drug benefit that arrived in 2006. LifeWise, it seems, was cancelling policies and switching policyholders to a new plan that was the “closest match” to their old one. The letter one woman got—posted to Scribd by TPM—said: “If we don’t hear from you, we’ll automatically move you to this plan and you’ll be covered starting January 1, 2014.” It made no mention of the state exchange where people might find something better or cheaper than the plan the company suggested. A spokesperson for the carrier told TPM, “Our experience is that our customers are already aware that they have other options in the market and that we’ve never had to tell them in the past that we have competitors.”

As for Humana, it, too, sent their customers letters downplaying the fact they had other options in the state exchanges—including cheaper plans from Humana—or could qualify for subsidies. Shades of Aetna! A footnote in the letter mentioned the “open enrollment period” that began in October but didn’t name the state’s marketplace or directly mention the availability of subsidies. Humana declined to talk to TPM but sent a statement saying, “In retrospect, the letter could have been more consumer friendly and we’ve rewritten it with that in mind.” (Both Humana and LifeWise were also discussed in an earlier Sept. 23 article in The Wall Street Journal, linked to by Scott, which is somewhat more sympathetic to the insurance companies.)

Scott’s story is a tale of insurance regulation as much as it is about corporate practices and customers in the dark. It points up the differences in regulation and the protections, or lack of them, shoppers have in different states. Good insurance regulation is crucial to making the Affordable Care Act work. It’s a neglected and underreported topic, and it shouldn’t be.

In Washington state, the Office of the Insurance Commissioner didn’t have the authority to stop LifeWise from sending letters with selective information, a spokesperson told Scott. The regulatory office did issue a consumer alert in mid-September (also posted by TPM) urging consumers to “make sure you shop around,” though it didn’t mention LifeWise by name. This is Washington, by the way, a state where the insurance commissioner rejected some carriers from the state exchange because of “narrow network” issues before political pressure was brought to bear and the plans were allowed after all.

Kentucky regulators, on the other hand, slapped a $65,000 fine on Humana for sending letters containing “misleading” information. State insurance commissioner Sharon Clark told Scott that some customers were badgered through phone calls to make a decision; of the 6,500 people who got the letters, 2,200 responded before they had a chance to investigate exchange options, Clark said.

Regulators in Colorado received similar complaints, and forced Humana to issue an apology and a corrected letter that met state standards. And in Missouri, regulators are investigating similar complaints. What about other states? Sounds to me like a good tip for further investigation.

One thing missing from Scott’s story was a bit of Humana’s past. The company has a history of aggressive marketing tactics relating to Medicare HMOs and, later, Medicare drug benefits. It got into hot water with regulators and made amends, all the while amassing huge market share that transformed the company into one of the nation’s largest health insurers. A bit of this backstory would add more context to the current events.

That aside, Scott’s article shows it’s possible to break through the insurance industry’s formidable wall of silence. Even if insurers continue to circle the wagons, there’s plenty on the public record that provides an entry point to understanding what the game is all about—competition and market share.

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